On February 25, Hezbollah’s deputy secretary general, Na‘im Qassem, made a statement that could ultimately mean the downfall of Prime Minister Hassan Diab’s government. Qassem declared that his party would “not succumb to arrogant means to address the [Lebanese financial and economic] crisis ... we will not let the International Monetary Fund manage the crisis.”
The deputy secretary general justified this by saying that Lebanon would not accept IMF money to address its ongoing economic collapse, because such funds would come with tough conditions the country was unwilling to accept. What was remarkable in his comment was that he was under the false impression that resorting to IMF funding is a choice. It is usually a necessity.
It was always evident that Hezbollah would have problems with an IMF bailout, because this would grant the institution significant control over aspects of the Lebanese state, including the party’s patronage networks. Moreover, Hezbollah believes, and statements by U.S. allies appear to prove, that some are thinking of linking IMF assistance to the achievement of U.S. demands on the party.
The problem is that without an IMF bailout, Lebanon cannot access funds to refloat its economy, nor receive the hard currency necessary to import vital necessities such as food, medicine, and fuel. Unless Hezbollah wants the whole system to come tumbling down, with no prospect of a resolution, it will have to compromise on the IMF.
Diab knows what’s at stake. That is why he made a remarkable statement on March 2 in which he admitted that “the state is no longer able to protect the Lebanese and guarantee them a decent life.” The prime minister realizes that without IMF funding his government is as good as finished. That is why those around him are putting a gloss on what Qassem said, pointing out that Diab will take the appropriate decision when the time comes and that the Hezbollah official was merely expressing his own point of view.
That’s certainly an optimistic reading, but one that is necessary to open the door to discussions on the matter between Diab and Hezbollah. Several things stand out in Qassem’s comments. First, by arguing that the IMF’s conditions would be too harsh for Lebanon to bear, he seemed not to grasp that when the country’s foreign currency reserves run out, the Lebanese will literally be screaming, and their pain will be far worse than anything the IMF imposes.
Second, Qassem appears not to understand that countries have a margin to negotiate with the IMF before it intervenes in their economy. Therefore, it is better for Lebanon to initiate such talks today, while it still has some leverage, than wait until everything is in meltdown and the country has none. Indeed, the IMF team that visited Beirut recently appears to have gotten the impression that the Diab government did not want the financial institution to bail it out.
Those in the government who understand economics, Diab among them, realize that Qassem’s blanket rejection is simply not feasible. There are those who will argue that Hezbollah doesn’t care and will go all the way to protect its stakes in the system, even if it means destroying Lebanon. But that may be an extreme interpretation, because complete ruination could sweep away the party’s allies, but also the edifice it has spent many months trying to preserve.
Moreover, if open-ended resistance is the party’s strategy, it’s not a very good one. Even Iran compromised at essential moments in its post-revolutionary history—whether on ending the war with Iraq or suspending its nuclear program to reverse its economic hardship. The only way for the party to avoid the IMF would be to push for reform of the economy, end corruption, and put Lebanon on a sustainable financial path. Does one expect this from a party that, like all others in Lebanon, has been feeding parasitically off the state for years, is continuing to protect a vile and decayed political class, and has never formulated any economic plan worth considering?
Yet reform is inevitable if Lebanon is to emerge from the tunnel. There are reports that the main constituents of the government still believe they can secure funding from outside. They believe that remittances from Lebanese can help float the economy. But that absurd reasoning in the best of circumstances will only buy time to pursue a road to nowhere. Banks will collapse, more businesses will close, poverty and unemployment will rise, social revolution will be in the air, and Hezbollah will preside over a field of devastation.
Fortunately, Hezbollah’s allies are not necessarily of the same view as the party. By all accounts the finance minister Ghazi Wazni understands the problem, and has surely explained this to the parliament speaker Nabih Berri. In fact, Berri’s decision to welcome an IMF advisory team weeks ago was regarded by some observers as a cautious opening to an eventual IMF bailout plan. Berri must know he is far more vulnerable than Hezbollah once the country runs out of foreign currency reserves and is cut off from international markets.
What about Hassan Diab? If Hezbollah gets its way, that means that his government, which has struggled to build public and international confidence, may be condemned to presiding over an irreversible deterioration of the economy. In such a context, the prime minister’s only option is to put his job on the line and tell Hezbollah that if it insists on limiting his margin of maneuver, he will resign. And even if Diab doesn’t do that, it is questionable whether his government can remain intact if ministers see that their ability to resolve the financial crisis is nil. In that case they may simply prefer to jump ship.
There will be hardliners in Washington who will try to use aid to Lebanon as leverage to secure concessions on Hezbollah’s weapons. This would be monumentally reckless. It would be morally repulsive because Hezbollah’s rejection is a near certainty, therefore such a move would condemn millions of Lebanese to dire poverty. It would provoke displeasure among countries in the IMF, who do not want the institution to serve as a branch of U.S. foreign policy. And it would lend credence to Hezbollah’s view that all foreign assistance is tied to efforts to weaken the party. Undoubtedly, Hezbollah holds Lebanon hostage, but collective punishment against the country would effectively mean killing the Lebanese in order to save them.
There is still considerable resistance to reform among Lebanon’s political class. No politician wants to surrender his levers in the system until the others surrender theirs. This has created a fatal deadlock and an urge, once more, to gain time. But that useless game has reached an end. Hassan Diab still has the latitude to push for change, because his resignation is something Hezbollah and its closest allies want to avoid. If an IMF bailout is inevitable, and it is, then he has to determine what it would take for the parties to go along with it.